Ezra Is Terrified Because of His Framing

Here’s an exchange from last Friday’s Chris Hayes “All In” MSNBC show among Chris, Robert Costa of the National Review, and Ezra Klein of The Washington Post’s “Wonkblog.” In what follows I’ve slightly edited the MSNBC transcript to get rid of obvious verbal deviations but haven’t corrected for punctuation.

Robert: i think ezra brought up a great point. you saw eric cantor trying to come up with this plan and that would allow conservatives, allow the right to have a vote on defunding, but not really attach it to the continuing resolution. the minute he brought this up, the conservatives they revolted. you have a republican leadership that wants to fund the government, but they don’t have the votes.

Chris: you’ve got 233 house republicans. you need 218 to pass something and 33 republicans want to fully defund obama care. you had harry reid today saying about john boehner, i feel sorry for him. everyone’s constantly looking at him saying he has essentially the worst job in washington. what is the way out of this box?

Robert: it’s a great question. i think as much it’s not a great way out of the box. what you see speaker boehner doing behind the scenes, don’t have a shutdown on the government. he is using the 2011 model. he says i was able to get concessions in 2011. we’ll fight for them in december. come with me. let’s fight on the debt limit. i don’t want to have a shutdown. it’s not going to help you with your races in 2014.

Chris: the thing about that is, that’s an even sick higher strategy.

Ezra Klein: this is terrifying that this is the argument. And the analogy I would use is this is like trading a bad flu for septic shock. it is the worst trade in the history of all trades you could imagine . . .

Then after further remarks from Ezra on the doomed strategy, a reference by Chris to game theory and games of chicken and a reinforcing comment by Robert Costa about the intransigence of the right wing and their hope of getting some concession from the Administration delaying some part of Obamacare, Chris asks Ezra if the Administration has a negotiating position “to throw the conservatives a bone?” And Ezra replies:

Ezra: no. the white house has complete religion on the debt ceiling. they believe not just about this negotiation, but about as a matter of presidential legacy. if they are the white house remembered for permitting the debt ceiling to become a routine matter of hostage taking in american politics, imagine you just think there’s a 10% chance of any debt ceiling negotiation going on. it’s not very big, but over ten years, it’s going to go wrong. this white house does not want their legacy to be they set in motion the chain of events that led to america’s role as an economic corner stone of the world being degraded. so they believe not just as matter of this negotiation, but all negotiations going forward. they need to break this habit now and that’s why i am scared going into this. nobody believes we’re likely to go over the debt ceiling, but if you look at the positions on the table now, the white house’s we will not negotiate and boehner’s, right now, the only thing that is there is the default.

I found this exchange really interesting because of Ezra Klein’s framing of the situation, more or less reinforced, if not endorsed by Chris Hayes and Robert Costa. Ezra’s terrified about the situation because he says there are only two positions “on the table,” namely, one side insisting on the ransom of a concession on Obamacare; while the other side is insisting on a “clean” debt limit increase bill. But, what does “on the table” mean? Does it mean only the positions that the Administration will publicly talk about, or perhaps only the positions that Ezra Klein and Chris Hayes, who know better, will cover? Both Ezra and Chris, and I suspect Robert Costa, as well, know very well that there are other options for the Administration besides giving in to the Republicans on Obamacare, or letting the Government default, shut down, or both.

They know this because there were at least four other options that were offered in the blogosphere and the news media during the 2011 debt limit crisis, three of them at CNN, that a well-informed White House might have been expected to know about. The four options were:

1. a selective default strategy by the Executive, prioritizing not paying for things that Congress needed, and perhaps not paying debt to the Fed when it falls due and working with the Fed to get the $1.6 Trillion in bonds that it was holding canceled;

2. an exploding option involving selling a 90-day option to the Fed for purchasing some Federal property for $ 2 Trillion. Then when Congress lifts the debt ceiling, the Treasury could buy back the option for one dollar, or the Fed could simply let the option expire;

3. using the authority of a 1996 law to mint proof platinum coins with arbitrary face values in the trillions of dollars to fill the Treasury General Account (TGA) with enough money to cease issuing debt instruments, and even enough to pay off the existing debt; and

4. using the authority of the 14th Amendment to keep issuing debt in defiance of the debt ceiling, while declaring that the debt ceiling legislation was unconstitutional because it violated the 14th Amendment in the context of Congressional appropriations passed after the debt ceiling mandating deficit spending.

Since, the summer of 2011, beowulf has offered yet a fifth option for getting around the debt ceiling by issuing consols. Consols are debt instruments that pay a fixed rate on interest in perpetuity, but never promise principal repayment at a maturity date.

The debt ceiling law is written in such a way that what counts against the ceiling is the principal repayment guaranteed by the instrument. Since consols provide no principal repayment, one can have unlimited consol issuance without increasing the debt-subject-to-the-limit.

The links above provide explanations of the various options, so I won’t describe them in more detail than I’ve already done here. But I do want to note a couple of points.

First, why didn’t Ezra and Chris remind everyone that there were many other options available to the Administration, apart from the one distasteful to the Administration and the other catastrophic to the economy? Were they so interested in the narrative of the terrifying game of chicken that they thought it best not to complicate matters by pointing out that there are other choices, less damaging for the economy, the Administration can make, and that these are not “on the table” only because they view the Administration as “the decider” of what is on the table?

What happened to the responsibility of the Press to put other choices on the table by acknowledging their existence and talking about them? Both Ezra and Chris have talked about some of these option, including platinum coin seigniorage before. Why not again now?

Why not point out that if the Administration does not negotiate with the Republicans, it can still prevent defaults and shutdowns due to the failure to raise the debt limit? Is it because the President prefers a crisis atmosphere, and perhaps even a shutdown to prepare the way for the treasured “grand bargain” on entitlements he has been seeking since at least January 2010, when he appointed the beloved Bowles-Simpson Catfood Commission?

That there may be something to this, is suggested by two things happening this morning. In his address to the Business Roundtable, the President stated his willingness to negotiate with the Republicans on the budget on matters including entitlements, along with his unwillingness to negotiate with them on the debt ceiling. Since the issue of the budget and a government shutdown occurs first, at the end of this month, he is saying that he is willing to do a deal on the budget with entitlements on the table, if the Republicans agree to give him a clean debt limit increase bill.

Then later on MSNBC’s “NOW with Alex Wagner” during a panel discussion also, including Alex Wagner, David Corn, and Ezra Klein again. After Ezra once again repeated his apocalypse now framing of the debt limit crisis, Sam Stein emphasized that Obama and the Administration continue to emphasize a willingness to negotiate over the budget.

Sam Stein: . . . you can see the contours of a deal that would upset both parties but palatable. something like in exchange for changes to social security payments, cpi, chained cpi. you could get a reprieve from sequestration. something like that along the lines where both parties are like, well, we don’t really want to do it, but for the sake of making sure we pay our bills — that’s why the republicans keep going there. they know obama care defunding isn’t going to happen, but there are other hostages.

Alex: why does president obama come to the table at all?

Ezra: i think that’s the kind of deal they would come to the table on. they would consider that a deal over sequestration. i’m not sure if they would do that exact deal, but the two deals they won’t do are the ones the republicans want. they don’t want that sequestration deal. they want an obama care deal or a debt ceiling deal. they won’t come to the table on those. . .

So, Sam Stein thinks the zombie “chained CPI” lives again, and Ezra agrees, but also thinks that the Republicans will not agree to that unless they get the deals they want. So, once again, the right wing, through their intransigence, may save us from President Obama’s continuing insistence that seniors must suffer now, and future seniors must suffer as well, for the sake of an illusory long-term debt/insolvency problem that doesn’t really exist, and that he can dispel at any moment by minting a $60 T coin.

Meanwhile, the four Versailles “progressives” on this panel laugh at the stupidity of the Republicans who are marching to the doom of their party, while refusing to call attention to the fact that this “funding” crisis, and the previous ones since 2010 were and are all kabuki, since the President could and still can dispel the illusion of possible insolvency any time he chooses to use the power Congress has given him to mint that coin. The big $60 T one; not just the timid TDC.

52 Responses to Ezra Is Terrified Because of His Framing

I’d love to see the president exercise option 4: declaring the debt ceiling unconstitutional. He’ll blink, though. He does not possess the will to stand firm in the face of insurrection.

Lincoln was also threatened by the south, at Fort Sumter. The governor of South Carolina informed him that any resupply of Union troops protecting the fort would be taken as an act of war. Lincoln resupplied his troops.

Me too, use the constitution , but he has to wait until the issue is ripe. He can make them seem the fools they are and utterly irresponsible. Let them try to take it to the Supreme Court. Good luck with that Ted Cruz.

Again, the 14th amendment challenge won’t work unless the Court denies standing. But to base the case on that expectation without a backup would be foolhardy, because if this Court thinks the Administration has a poor case it may just grant standing even though it should not.

I agree that’s what they were talking about. But their first job is to tell everyone what the options are and the second is to tell them the only ones the President is considering so they can judge for themselves whether the other options are preferable to to the ones the President is presenting as the only alternatives. This function of the Press is very important, especially when they are continually dealing with a President who lies by omission, so he can create faux crises. Yet these shining examples of “press responsibility” are playing right into the President’s kabuki narrative.

Let’s stipulate that the $60 Trillion coin or some variation of seiniorage works.
What do you honestly think the political reaction would be? I can see many on the Right going completely berserk claiming that we’ve scuttled the rule of law and all sorts of other high dudgeon. The Left hasn’t done much to lay the groundwork so it’s likely that the general populace would be, at the very least, hesitant to believe in the idea. What about international markets and institutions? How do they react?
I’m not questioning the policy, I’ve read your Blog and your books and it makes sense. I am questioning whether the idea wouldn’t be seen as being every bit as illegitimate as Republican hostage taking. There is a significant component of the Right that seems as close to instigating the sort of Constitutional crisis as the secessionists were in 1860. I’m really interested in reading your take on the politics of this, how it plays out both domestically and internationally, especially how you would handle the most rabid voices on the Right.

I think I mentioned both here and in my book what I think the reaction would be. But, to repeat, it would be met by hysteria from the right wing and their media. It would be met by hysterical ridicule from the establishment wonkers (or should I say wankers). It would be met by analysis and attempts to play catch-up by the village progressives and the Obots who don’t like to go against Obama. Krugman would say it’s too much and that he should just have used just the TDC. It would be met by Wall Street with fear and lobbying for further debt issuance so they won’t their risk-free safe harbor. It would be met by CBO with new forecasts showing smaller deficits and debt because their interest cost projections will all be invalidated.

People, in general, would just listen to the President’s speech, and say to themselves, well, let’s just wait and see. Then, when the President paid down about 60% of the debt subject to the limit during the first year,without any more inflation than there is now, people would start applauding and would begin to understand that there never was any problem about the government running out of money at all, and that the austerity policies to ease the burden on our grandchildren advocacy was always a scam in the service of the class war by the haves against the have-nots.

(Sorry, I still haven’t gotten around to your book, so perhaps you’ve answered this there…)

Playing the chess game a move or two further out; what could the Powers That Be do to terrorize the populace, and what must be done to forestall that. E.g. assume that some portion of Wall Street recognizes that PCS represents a blow to their power, and that if inflation doesn’t follow then a new economic order will start. Assume that some percentage of those are willing to go to drastic measures to discredit PCS. What would they be willing and able to do to cause rise in CPI and unemployment, and then lay all of the blame on PCS? There are a great many people who believe that the stagflation of the late 70s was caused by leaving the gold standard in the early 70s. Minting the $60T platinum coin would be every bit as momentous an occasion as closing the gold window. (This, of course, assumes we have a way around the problem that Obama has no desire to directly confront his financial backers and delegates all economic policy to Rubinites.)

My guess is that the best defense we have against the 1% wrecking our economy in a temper tantrum is the Jobs Guarantee program and payroll tax suspension… but would we be able to get those passed during the “wait and see” interim period between PCS and when people “start applauding and would begin to understand”? Or would the financiers and paid-off media do enough damage to discredit us during that time?

Good questions Nick. I think banksters who see the implications of PCS might try to sabotage the program by ginning up inflation, probably oil and gasoline prices, by bidding up futures to ridiculous highs. This might be countered initially by releasing oil reserves, or with legislation limiting futures purchasing to those who actually use commodities, but that might be difficult to sell in Congress against bank lobbyists. I bet others can envision different scenarios that might produce similar results.

Sunflower and Nick, I really think there is little they can do about it. Consider, the first WEEK out the President can pay down something like $6.7 T of the debt subject to the limit last time I looked. Most of that would be paid to the Fed and other Government agencies, so no impact on the economy. Second, the stagflation of the ’70s wasn’t demand-pull inflation, and Carter’s silly attempts to restrict Government spending did nothing to stop because it was cost-push caused by the Saudis setting prices and reactions in the labor market. Now, the Saudis would not be pushing on oil prices, and labor is much too weak to be pushing prices up. So, the same thing can’t happen.

Third, The speculators in oil wouldn’t be able to drive up the price of oil very much at the same time they are crashing employment, simply because people would have to cut their use oil drastically if the price goes up. So the market would break and the speculators would lose a pile.

Fourth, once the $60 T is out there, the Democrats will be much better able to push ideas like the JG and the payroll tax cut, as well as other government spending. If the Rs oppose they’ll get beaten in 2014, and the Dems will have a clear field to pass those programs, provided to get rid of the filibuster, and also a clear field to regulate the big banks tightly once and to end speculation in the international casino.

Bottom line the coin is the key. Do it and many things become possible that aren’t feasible now.

“Third, The speculators in oil wouldn’t be able to drive up the price of oil very much at the same time they are crashing employment, simply because people would have to cut their use oil drastically if the price goes up. So the market would break and the speculators would lose a pile.”
I think this would be a contest to see who blinks first. The economy wouldn’t crash right away, although increasing gasoline prices would start pinching drivers immediately, but speculators and (especially) bankers have enormous funds as reserves (thanks to QE) to invest, with the prospect of further QE purchases to possibly bail them out. The President would have to have the fortitude to endure angry motorists, release some oil from the strategic petroleum reserve, and cut off the QE spigot or he could loos the contest. Fortitude is not Obama’s long suit, but if he did prevail, I agree the speculators would get a well deserve haircut.

“people would start applauding and would begin to understand that there never was any problem about the government running out of money at all”

Only if that is explained to them in precisely that way. Obama won’t do it. I doubt he understands it, or he would consider some form of the coin. “People” don’t listen to MMTers, they only listen to the likes of the “journalists” you named here, who would rather ignore it in order to boost their ratings.

Hi John, I don’t expect to listen to MMTers for some years. However, when I say “people will applaud etc” I’m assuming that the President will have minted that $60 T coin. I think that if he were to do that he certainly would be prepared to explain it in all the ways he needed to in order to justify it, including explaining it “in precisely that way.”

On listening to “journalists” I’m afraid that I don’t think that the public spends overly much time doing that. In fact, they hold journalists in lower esteem than they they hold the President and listen to them a lot less.

When it comes to what Americans want, I think polling data shows that they most want a stronger and more extensive social safety net, an end to high unemployment through more and better paying jobs, paying down the debt, and also lower taxes. It can’t be emphasized enough that they can have all that and Obama and the Democrats can give them these things over the next few years, if they mint that coin and then push, push, push for all these simultaneously.

It’s a winning formula, and all the Democrats have to do is to convince people that they can have all these things at once. The first step in that process is persuading them that the Treasury has plenty of deficit spending money available, and that it only remains for that wicked Congress they all have such a low opinion of to appropriate the programs and tax cuts necessary to make everything happen.

I meant Obama would not explain it correctly (even if he were to mint the coin). I don’t think he will mint the coin, but if he does it will be for political advantage, not because he understands the economic effect.

If not “journalists”, who does the public listen to? Where does the public get their news (and through what filter)? Maybe the public doesn’t trust them, or like them, but they are the ones speaking. There is nobody else but “journalists” speaking the news on TV or radio or the web. There is no other place to get the news, by definition.

First, a lot of Americans simply ignore the news on a daily basis, or read it only very selectively filtering out stories on politics and economics. I think you know this.

Second, there’s a great deal of both credulity and cynicism (amazing I know) on the part of the low information public. And here I’m not even talking about Fox News followers. They’re high information people (even if it’s false information) compared to many others. I am talking about a majority of Americans however. And their attitude towards the Press and the media is a predisposition to believe things that are in line with what they already believe or want to believe, and to be extremely skeptical about things they do not want to believe.

I think the polling data shows that the public thinks the Government can help to produce a better economy, strengthen the safety net, provide Medicare for All, lower taxes and pay off the national debt. They don’t believe that the Government can print money without consequence, of course; but I’m not sure that’s something they want to believe. Anyway, their view that the Government can help to produce a better economy, strengthen the safety net, provide Medicare for All, lower taxes and pay off the national debt is true provided that PCS is used and properly explained to them.

So, the question is: will their desire to believe all these things simultaneously outweigh what they believe but really don’t want to believe, namely TAANSTAAFL. I think that with the President’s explanation and assurances that “printing” money will not cause inflation because of the way he plans to use the proceeds from the coin, they will give him the benefit of the doubt on the “printing money” issue, and wait and see before opposing the coin. And, as soon as they see they big drop in the debt the first week out, they will be encouraged and will continue to wait to see how things play out. When the debt continues to go down over the next three months and there are no further debt limit crises again they will begin to feel comfortable, and when the Democrats start campaigning for extending the safety net and creating jobs they will be willing to try that and begin to place pressure on the Republicans to support measure to do those things. By the end of the summer of 2014, they will be ready to kick out the Republicans if they don’t support these Democratic measures.

Once they do, the Democrats will have a clear field in 2015 to pass expansive economic legislation.

“he [meaning the President] is saying that he is willing to do a deal on the budget with entitlements on the table, if the Republicans agree to give him a clean debt limit increase bill.”

And I’ll gladly pay you Tuesday for a hamburger today. If the Republicans fall for that one again, they’re done for. A serious proposal along those lines would be for Obama to make the entitlement deal before the debt limit expires. Don’t hold your breath for that one.

I think the President is ready to make the entitlement deal and then trust that the Republicans will go through with an agreement on the debt ceiling later. He can ensure this sequence because Jack Lew can juggle things so the debt limit isn’t breached for a long time after October 15th if need be. If I know him he’s got at least 2 months of juggle time built in there.

I’ve heard that too. But I don’t believe it. Jack Lew would never leave himself with a hard date and no wiggle room. If he said October 15, then he can last at least until November 15th; perhaps even until the end of the year, if he’s careful enough. he’s a very good budget manager. He proved that during the last years of the Clinton Administration, when, as OMB director, he produced those surpluses.

Regardless of the validity of the policy I think your predictions of the response are wildly optimistic. You have an American public that is completely ignorant of basic macroeconomics, people who still cannot understand that a country with a printing press, a reserve currency, and presumably an indefinite or perpetual lifespan is very different from their personal budget.
It sounds like you’ve come to the conclusion that because the policy is so elegantly simple, straightforward, and correct that the vast majority of people will see it as such and react accordingly. If that were the case people like Steve King, Louie Gohmert, Michell Bachman, or for that matter Chuck Schumer would never get elected. If that were the case millions wouldn’t tune into Beck or Limbaugh or much worse every day and millions more would know that the Times and the Post were pretty much full of shit.
Currently the vast majority of academic economists agree that austerity is bad policy and yet austerity still prevails.
I really do wish you were right about the reaction and response but I just don’t see it. The economics are sound but the politics are a mess and that is a very big problem.

If a person believes A, and someone he doesn’t know or trust tells him B, he is unlikely to simply accept it as fact. That alone would tend to explain why people can work problems about things they are unfamiliar with, and reject the same line of reasoning when they believe the “facts” of the problem as presented are just wrong.

Mark What do people have to know? The President will tell them he’s going to use the proceeds from the coin to 1) get rid of the debt subject to the limit to make the debt limit law irrelevant; 2) lower their taxes by getting rid of the payroll tax until full employment is reached; 3) deficit spend on a job guarantee program at a living wage w/ full fringe benefits; 3) deficit spend on new energy foundations and green jobs to safeguard the future of their children and grandchildren and make us energy independent; 4) improve their educational systems so that they become the best in the world; 5) rebuild the US Infrastructure so we have no more bridges falling over; and 5) expand the social safety net so seniors can better support themselves and enhanced Medicare for All is with zero co-pays is available to everyone. What more do they have to understand?

I’m serious about this. From the standpoint of the people, if they see and hear a President say these things, and say he has the wherewithal to do all of them with the proceeds from the $60 T coin provided Congress appropriates deficit spending for the needed programs. How many of them, do you suppose, will not give him the benefit of the doubt and take a wait and see attitude to see if the President’s program will work?

Joe
First, I support PCS at $60 Trillion and used to believe in Obama.
Now, back to reality. Joe, do you really believe that the basis of our system (debt, interest payments, banksters, the Fed) is just going to roll over let the Communist Usurper undermine our grand and glorious capitalistic system?? The Ubber wing of the GOP has been in continual spasm since the passage of a right wing/Heritage Foundation designed corporate welfare/health care system.
I would predict immediate (6 month) oil price shock, removal of oil pricing in dollars, removal of $ as foreign reserve currency of choice. All of this and more panic induced actions. Think what happened when the world found out about our fake AAA real estate bonds and bundling.
MMT can be useful in caring for people. Sadly our corporate capitalist world does not. One would think that caring for people would be good business (Medicare). Currently money and power are determined by competitive advantage and cutting at the bottom. What will rule in its stead?

No. I don’t believe they’re powerful enough to run the world. They can crash the economy; but only if we let them. If they try this time, we can stop them with the $60 T in the bank, and using the crisis this time to push real controls through the Congress. This is especially true if the crash occurs post-election. If it seems to developing before the election, then the President can make it clear that there will be no more bailouts, only FDIC resolutions and investor haircuts.

How do you explain this to them when 90% of them, including the politicians, still believe we are on the gold standard. Before taking office, every elected official should have to take a basic economics course so they have a chance of understanding what you are saying.

They should at the very least have to understand topic 2 of the primer on the MMT website. The ignorance of our politicians is appalling. I expect it from the public but the leaders should have some understanding.
They still believe paying off the deficit and the debt is good even though it has always led to repressions or depressions.

If you haven’t noticed, it’s not only politicians. There are plenty of economists in favor of austerity as the solution to our problems. A basic economics course from all but one US college wouldn’t help. MMT is not taught in basic economics.

I think Golfer is right. MMT should offer a one day seminar on budgeting and monetary theory for Congressmen and women and especially for Congressional aides at the beginning of each session of Congress, free of course. An ongoing (once a month) seminar for aides exploring MMT in more depth could also help. Would you contribute to help fund?

Sorry, I’ve been out of the loop for about a week. Our ISP’s servers crashed and I had some additional issues with email. I am willing to contribute $100 to get things started and $25 per month for the next two years. How about other MMT’s?

Gimmick or not, it certainly seems like one. The 14th Amendment is one approach, but how about something more straightforward asserting the power of the President to protect the country from disaster that would be caused by a small minority of Republicans in one house of the Congress? The Constitution gives the President the executive power. Paying the bills already incurred is an executive function. Performing the financial steps necessary to pay the bills is an executive function. Executing laws already in place ordering the President to spend money is an executive function. To the extent the debt ceiling law would be construed to impede the President’s exercise of the executive power on obligations already incurred and laws in place, it is un-Constitutional.

Geez, Obama can mimic Bush in aggressively asserting the scope of executive authority when it comes to acts of warfare and national security. Yet he cowers whimpering in the corner when it comes to protecting the American people from the disaster of a government shut-down by re-affirming the Supreme Court’s declarations that the Constitution is not a “suicide pact”? Shutting down the government is not a matter of national security?

To the extent the debt ceiling law would be construed to impede the President’s exercise of the executive power on obligations already incurred and laws in place, it is un-Constitutional.

The law doesn’t impede the President because he can use PCS or consols to meet obligations, so, Q.E.D. the debt law isn’t unconstitutional. The President doesn’t have the constitutional authority to stamp his foot and insist on the particular method to be used to pay obligations. He does have the discretion to select among the methods to be used to meet those obligations. End of story.